Capital markets must deepen investor base, improve liquidity to meet infra needs: SEBI chief

Capital markets must deepen and diversify the investor base by encouraging institutional investors like mutual funds or pension funds, as well as retail investors, to systematically allocate to infrastructure securities, Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey said on Thursday.

Addressing the NaBFID Annual Infrastructure Conclave 2025, Pandey stressed that improving liquidity and accelerating asset monetisation are crucial to meeting the country’s infrastructure ambitions.

“India’s infrastructure story is inseparable from its growth story. Public finance and bank credit laid the foundation, but the road to Viksit Bharat must be increasingly paved with the dynamism of capital markets,” Pandey said.

He pointed out that while InvITs, REITs, Alternative Investment Funds (AIFs) and municipal bonds have emerged as important sources of long-term capital, the funds mobilised so far remain modest compared to the trillions of rupees required.

REITs, InvITs scale up

Over the past five years, five Real Estate Investment Trusts (REITs) and 23 Infrastructure Investment Trusts (InvITs) registered with SEBI have mobilised ₹1.5 lakh crore, with assets under management of ₹8.7 lakh crore as of FY25.

Pandey said reforms such as expanding the definition of strategic investors, reclassifying REITs as equity for mutual funds and introducing Small & Medium REITs have helped attract a wider pool of investors.

AIFs gain traction

Alternative Investment Funds have seen rapid growth, with investments rising from ₹1.1 lakh crore in March 2019 to ₹5.7 lakh crore by June 2025.

Category-I AIFs focused on infrastructure have already deployed over ₹7,500 crore, Pandey said, adding that SEBI has reduced the minimum investment threshold for Large Value Funds from ₹70 crore to ₹25 crore to attract more long-term capital.

Push for municipal, green bonds

Highlighting urban infrastructure needs, the SEBI chief said municipal bonds must evolve into a key pillar of city-level financing. Since 2017, 21 municipal bond issuances have raised about ₹3,134 crore.

Pandey said that SEBI is pushing for greater adoption of municipal and green bonds to finance India’s growing urban and sustainable infrastructure needs.

Green bonds have mobilised ₹7,500 crore across 24 issuances since 2017.

Green Bonds channel capital “specifically towards climate-friendly and environmentally sustainable projects such as renewable energy, clean transportation, and efficient water management,” the SEBI chief said.

Challenges ahead

Pandey cautioned that the investor base remains narrow, secondary market liquidity limited, and project readiness uneven across municipal bodies.

“We must deepen and diversify the investor base… The more hands we have holding these instruments, the stronger and more liquid the market becomes,” he said.

The SEBI chairman also urged states to speed up asset monetisation.

While the central government’s asset monetisation plan has played a key role in developing the market for InvITs, Pandey said there is a need to accelerate monetisation in sectors such as roads, railways, ports, airports, energy and logistics.

“State governments, barring a few, are yet to crystalise asset monetisation plans to provide further boost infrastructure creation. This gap needs to be addressed,” he said.